Export Competitiveness
The growth rate of Korea’s exports to China is on a sharp decline. The biggest culprit behind the decline is the fact that the proportion of processing trade in China has been falling. Another big reason is that Korea’s major industries are overlapping with those of China and in general, Korea’s industries have weak competitiveness according to experts.
“In August, the growth rate of Korea’s exports to China dwindled 3.6 percent year-on-year,” said Lee Jun-hyeop, the head of the Economic Trend Department at the Hyundai Economic Research Institute who took part in a seminar on measures to enhance the export competitiveness of the Korean industry and expand new growth engines for the Korean industry held by the Korea Economic Research Institute under the Federation of Korean Industries (FKI) at the FKI Conference Center in Yeouido, Seoul on Nov. 19.
"China is ramping up its self-sufficiency rate and cutting down on processing trade as the nation is going ahead with its “new normal” policy,” Lee said about what caused the drop in Korea’s exports to China. “The proportion of improved trade in China’s trade stood at 48.5 percent in 2000. But as of Sept. 2015, the percentage was 31.0 percent.” “In particular, since China’s seven strategic newly emerging industries overlap with or are similar to strategic industries of Korea, the competition between Korea and China will become even fiercer,” Lee added.
Some claimed that generally, Korea’s major industries have weaker competitiveness.
A comparison of the world’s 20 largest export powerhouses’ export competitiveness in 2010 and 2014 found that Korea’s export growth has greatly slowed down since 2011, said Lee Sun-cheol, a professor at Pusan University of Foreign Studies. According to the professor, Korea’s export growth rate reached 28.3 percent in 2010 and 19 percent in 2011. But the rate slid 1.3 percent in 2012 and has stayed at the beginning part of the two percent level since 2013.
“This is attributable to the overall drop in the Korean industry’s competitiveness rather than to the global economic slump,” professor Lee said.
”Korea’s key industries should quickly transform into high-value-added industries from simple processing industries in order to recover their export competitiveness," professor Lee added. “Companies ought to scale up R&D investment and diversify exports. The government must make all-round export support strategies rather than key industries-oriented export strategies.”